Mapping and Tracking Fair Value Gaps with Price Bars

Summary

The document describes a price-chart indicator that marks potential fair value gaps, defined here as zones left between a bar’s high or low and the neighboring bars when price moves directionally without retracing through the area. It stores the boundaries and starting bar for each detected zone, then draws colored rectangles that extend forward until price partially enters or fully crosses the zone. High-side and low-side gaps are tracked separately, with their boundaries adjusted as price trades into them.

The proposed use is to watch these untested areas for possible retracements or continuation, and the description mentions forex and commodities as intended markets. However, it provides no trading rules, historical tests, measured performance, or evidence that gaps predict reversals or continuation. The identification logic is a particular bar-based definition, and the author notes that multi-timeframe support is a future step. The indicator is therefore a visualization aid, not a validated standalone strategy.

Key ideas

• The indicator flags price zones formed by directional movement that leaves an untraded interval between bars.
• It stores gap boundaries and extends chart rectangles until price partially enters or crosses the zone.
• Separate logic tracks upper-side and lower-side gaps and updates their boundaries during partial fills.
• The zones are presented as areas to monitor for retracement or continuation, without supporting performance tests.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.